Umm, About That $100m Microsoft Funneled to SCO

A piece of juicy compromising e-mail written by a SCO consultant to SCOsource VP Chris Sontag and SCO CFO Bob Bench last October suggesting that Microsoft had quietly funneled $86 million to SCO and that it was good for at least $106 million before tapping all possibilities happened to turn up on open source philosopher Eric Raymond's web site Thursday.

Eric made it part of his Microsoft-embarrassing internal documents collection and dubbed it Halloween X. (See www.opensource.org.)

He says he got it from an "anonymous whistleblower inside SCO," which is odd because, given the timing and other little niceties, one would be tempted to think that it was a bit of SCO discovery that somehow got loose from IBM. Oh, yeah, Eric is a sometime consultant for IBM and his anti-SCO credentials are impeccable.

Right at the top of the kinda disjointed e-mail the consultant, one Mike Anderer from the M&A side of an outfit called S2 Strategic Consulting, clearly refers to Baystar Capital, the VC that was part of a $50 million investment in SCO last year, as a "Microsoft referral."

SCO admits the e-mail is genuine but claims it was misguided. SCO spokesman Blake Stowell read a statement that said, "We believe the e-mail was simply a misunderstanding of the facts by an outside consultant who was working on a specific, unrelated project to the Baystar transaction and he was told at the time of his misunderstanding. Contrary to the speculation of Eric Raymond, Microsoft did not orchestrate or participate in the Baystar investment."

Evidently Microsoft did introduce SCO and Baystar, but the millions Baystar, an obscure house, put in was Baystar's, not Microsoft's. Of course, Microsoft was doubtless grateful, and gratitude can sometimes be profitable.

IBM has already subpoenaed Baystar, along with a couple of other SCO investors, so it should be interesting to see what its fishing expedition turns up.

The other investor in the $50 million round was the Royal Bank of Canada. Microsoft is supposed to have paid SCO $10 or $11 million for some Unix IP.

CIO, CTO & Developer Resources

The rest of Anderer's e-mail says:

"I realize the last negotiations are not as much fun, but Microsoft will have brough [sic] in $86 million for us including Baystar. The next deal we should be able to get from $16-20, but it will be brutial [sic] as it is for go to makerket [sic] work and some licences [sic]. I know we can do this, if everyone stays on board and still wants to do a deal. I just want to get this deal and move away from corp dev and out into the marketing and field dollars.

"...In this market we can get $3-5 million in incremental deals and not have to go through the gauntlet which will get tougher next week with the SR VPs.

"...Microsoft also indicated there was a lot more money out there and they would clearly rather use Baystar 'like' entities to help us get signifigantly [sic] more money if we want to grow further or do acquisitions.

"This Microsoft deal is the Ante to the poker game...We should get this done and go after several $2-3 Million deals from the expense side of their company. So their revenue plan for the future is to hit Microsoft up for money, then hit them up for more money. The [sic] will help us a lot and if we execute we could exit and Unix componients [sic] we have build [sic] potentially back to Microsoft or MCS.

"I think they are on track and may not be able to push much more this round, but there are other ways to get money from them, their partners, investment bank referrals, etc.

"Do kepp [sic] in mind that they have brough [sic] us between $82 million and $86 million if this deal is between $4million per quarter where Rich [Eric think he means Rich Emerson, Microsoft's senior VP of corporate development and strategy] is at, or it turns into %5 [sic] million wjich [sic] is the lowest number Chris had interest in.

"There will be more, lo[a]ns, partnerships, etc. but we need to just get this one done. It is too high profile, it is also critical, but they are not the people to pitch. We should get what we can from them ad [sic] then work the other and larger areas of the company and groups where they have real budget and need for our help."

Maureen O'Gara the most read technology reporter for the past 20 years, is the Cloud Computing and Virtualization News Desk editor of SYS-CON Media. She is the publisher of famous "Billygrams" and the editor-in-chief of "Client/Server News" for more than a decade. One of the most respected technology reporters in the business, Maureen can be reached by email at maureen(at)sys-con.com or paperboy(at)g2news.com, and by phone at 516 759-7025. Twitter: @MaureenOGara

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Most Recent Comments

gbob03/08/04 06:41:19 PM EST

In response to Huh?

Do you have any specifics on "vaguely uncomplemtary" ? I've been following this a while and what is happening is a bit beyond "vaguely uncomplementary" it is more of a full frontal assault by SCO, funded by MS..

Huh?03/08/04 06:29:40 PM EST

Seems like Microsoft and SCO aren't the only organizations adept at spreading FUD. If someone mutters something vaguely uncomplementary about Linux, the zealots scream FUD, but give ESR a leaked memo from an outside contractor, and speculation and accusations pour from the mouths of the same people.

The hypocrisy is incredible.

rich gilbertson03/06/04 04:43:38 PM EST

First off, Gates did not buy MS-DOS, he bought Down and Dirty DOS (a rip off of CPM). And if the creator of CPM had not have died he would be in Gates shoes.

Second off, Cross Compilers were the thing back then, THAT is why all the code looks the same.

Third off, check out why there are not anymore Cross Compilers today. If we had them most of our problems would be much smaller.

It's all speculation but nothing between SCO and Microsoft would surprise me. Only time will tell. The only annoyance with waiting is having to put up with the FUD noise out of SCO.

daljon03/06/04 02:34:03 PM EST

MS also put money in Apple.

John Harrison03/06/04 12:49:40 PM EST

SCO "sells" Linux licenses as part of a lawsuit settlement and includes an NDA so that the "customer" can't publicly admit that they are (or are not) a customer.

It smells pretty desperate when you won't let your "best" customers comment on what they've bought from you.

Jeff03/06/04 12:01:32 PM EST

Hmmm...and while reading all the diatribe and being a microsquishy basher myself - what to my wondering eyes should appear?? A microsoft add on LinuxWorld (offering unix services on MS for the "datacenter".... oh yeah, that should just about make Linus's day - who's to say SCO isn't the only one with their hands in Redmond's pockets

wtrmute03/06/04 10:48:49 AM EST

The really unfortunate part is that in the old days, Caldera used to be one of the better Linux distros out there. They had a good system installer, lisa, for example. Shame, really, what Mr. McBride's done with the company.

ces03/06/04 10:45:41 AM EST

Remember Microsoft is already under court supervision for the anti-trust case they lost (even if the punishment was weak).

The judge can take things like Microsoft funding SCO's crusade against Linux as evidence that Microsoft isn't complying with the remedies ordered.

Also if there is enough of a smoking gun with the memo IBM, RedHat, and Novell could potentially drag Microsoft into their lawsuits with SCO. As well as turn up enough evidence for later lawsuits against Microsoft including private anti-trust suits.

gbob03/06/04 10:06:02 AM EST

Assuming this is true (and if you look at MS past behavior patterns, this is not a big leap), then what you have in essence right now is Microsoft (through SCO) bringing law suits against AutoZone and maybe Daimler Chrysler for using products not sold by Microsoft.

El03/06/04 10:02:07 AM EST

What would you do if you had $500 million? Never work again? Why would you care whether or not you were committing "career suicide" if somebody gave you enough money that never finding another job wouldn't be a problem? Let's see now, I can continue working another 25 years, and earn maybe a total of $1 million over that time, and pay half that in taxes... or I can take $10 million right now and retire... which would you do?

johnvu03/06/04 09:53:19 AM EST

Let's assume that this is truly the case - that SCO is just a pawn in Microsoft's chess game. If so, why would the likes of Darl McBride and his cronies commit career-suicide? Come on, let's be honest, once Darl loses, what company would even want to touch him with a ten-foot pole? He'll always be referred to as "that guy" who started a ridiculous claim that never came to fruition.

The only thing that I can think of, to make it worthwhile for Darl to do such a thing is if Microsoft said to him "don't worry about your career, we'll take care of you" and paid him off big-time. The legalities of this payoff is questionable -- but then again, the legalities of what SCO is currently doing is highly questionable.

k_head03/06/04 09:52:17 AM EST

So what? It's not like the DOJ would punish them or anything. Legality only matters if the court system is willing to go after you when you break laws. The DOJ has shown no willingness to hold MS accountable.

DougJohnson03/06/04 09:51:42 AM EST

Microsoft can't buy UNIX as it would be a breach of their anti-trust settlement and an obvious move into a MORE monopolistic position

Suzuki-roshi03/06/04 09:51:12 AM EST

Speculation where? In your head? MS is not going to push Linux anytime soon. Your statement about Windows and Longhorn sounds a lot like what people said about XP four years ago. Besides, MS couldn't get away with buying out SCO.

In the beginner's mind there are many possibilities. In the expert's mind there are few.

rixstep03/06/04 09:50:36 AM EST

An interesting postulate. Perhaps that's the carrot MS are dangling before SCO. If SCO can get a sort of 'monopoly' on Unix, MS will buy them and put them all on easy street.

There's been a lot of speculation that MS would go towards their own Linux distro, and that both Windows and Belgian Blue (Longhorn) are dead in the water. To enter a new market, Bill would want a monopoly.

That's a given.

harmless_mammal03/06/04 09:50:01 AM EST

Doesn't it look like SCO is interested in selling its Unix properties to Microsoft if they're actually successful in solidifying their position?

Sj003/06/04 09:49:15 AM EST

Gotta love capitalism. It works as well in theory as communism does in fact. Luckily, it works a lot better in fact that it does in theory, but it can still be awfully silly sometimes. :)

Sj Zero

MooCows03/06/04 09:48:23 AM EST

As much as I hate to say this, the justice system isn't going to do a thing against MS as long as they don't commit massive frauds or something similiar.

To the government MS is simply a healthy company bringing in a boatload of cash, who cares if they don't play by the rules [of capitalism].

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